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POLITICO LIVE: Inside Koch network

Harris on Koch reboot

Americans for Prosperity, the Kochs’ main political outlet, parted ways with its chief operating officer, most of its 100-plus employee field staff and several fundraisers. Generation Opportunity, a Koch-backed youth mobilization effort, recently replaced its president.

Charles and David Koch’s network also is withholding cash from some groups pending the full audit results, and it has postponed both of its signature donor conferences this year.

The pressure isn’t coming just from the inside. California regulators are issuing subpoenas and demanding phone and business records in an investigation that could reveal the secret donors funding some Koch-linked groups or even result in those donors becoming targets themselves. And David Koch has told friends he is weary of being pilloried by liberals and Democrats up to and including President Barack Obama as the personification of the corrupting influence of money in politics.

It’s not all gloom and doom in Koch World, but the brothers are at a potential turning point and their decisions could go a long way toward shaping the future of the Republican Party.

If they continue an expansion into electoral politics that helped spawn the tea party and push the GOP to the right, they could find themselves on a collision course with Karl Rove, who has pledged to raise big money to boost more centrist or “electable” GOP candidates. But if they begin steering cash away from ads and political organizing and back toward the free-market libertarian ideological and policy spheres, that could diminish their role at the ballot box.

Early indications suggest that they’ll continue playing in politics but will tweak their approach to reflect 2012 lessons.

Top Koch operative Kevin Gentry emailed associates after the election about “a growing belief that one of the Obama campaign’s competitive advantages was their analytical approach to almost all of their messaging” while others in Koch World have hinted at a more decentralized and below-the-radar strategy.

“They’re trying to figure out a way to benefit their causes” without becoming straw men at the same time, said a source familiar with their thinking.

They’ve blessed the formation of a new secret money nonprofit group, the Association for American Innovation, POLITICO has learned. It will be run by former top AFP strategist Alan Cobb and will wage a behind-the-scenes push in state capitols for reforms consistent with the brothers’ small-government, free-enterprise philosophy, including possibly curbing union power and abolishing income taxes.